My 1st Million At 33 – yes, you can do it too

A site to share my tips, tools, and humble thoughts on the journey to wealth

Payday Loans     Cash Advances     Faxless Payday Loans    
Legal disclaimer     Free Financial Astrology     Payday Advances     Personal Cash Advances     1 Hour Loans & Credit    
Site Map for 1st time here

  • Categories

  • Archives

  • Spam Blocked

  • Sponsors

    • «
    »

    Warning from the Dow Theory

    Posted by Frugal on January 4th, 2007

    Go and check out this link on the truck business slowdown. The not-so-great Xmas retail seaon plus this news is the precursor of something worse to come I believe. One trillion plus of mortgage resetting in 2007 will definitely have an effect on the US economy. Unfortunately for all the renters and bubble sitters, last time I check, you can still refinance an option ARM into another option ARM and still starting at 1% teaser rate. Each time, you get some 5 years of breathing room, unless you cannot handle the 7.5% annual increase in the payment (which would be a lot if you’re already close to the max).

    Tim Wood at financialsense has a very detailed article explaining how Dow Theory can be used to predict the stock market. Here is only a short paragraph from his full article:


    Here’s how this works and why. The thinking is that in the economy, goods produced must be shipped. To gauge an accurate read on the economy, production should move hand in hand with shipping. If industrial production is rising, then it stands to reason shipping should be on the rise as well. If industrial production is rising, but shipping is slowing, then it signals something is wrong with the normal flow of the markets. Perhaps excess product has been manufactured, but sales (as measured by shipping) are lagging. If goods are being shipped at a rising clip, but production is falling off, it signals something is wrong with the economy, that perhaps shipping is soon going to follow production lower since there won’t be as much product to ship. If the decision-makers who produce goods based upon orders, or expected orders, are Bearish, it will be reflected in a declining Dow Industrials index. So, for a healthy economy, both the Industrials and the Transports should rise in sync.

    I checked into the Yahoo charts. And you can probably guess how the story goes. Dow Transport is NOT confirming the rise in Dow Jones. Something really fishy. This chart is simply confirming what the news in truck business slowdown telling us. WATCH OUT!

    dow_transport.png
    (Click on the figure to go to Yahoo’s original chart.)


    More related posts:
  • My Eerie Calm about the Markets
  • Dow Theory Had a Sell Signal

    • Digg it Del.icio.us Reddit Furl BlinkList Newsvine Yahoo MyWeb

    Filed under Stock Market.

    4 Responses to “Warning from the Dow Theory”

    1. steve Says:
      January 4th, 2007 at 6:19 am

      2007 marks new regulations on diesel fuel. With that comes lots of new model engines and the stuff that goes with those engines. So over the road trucking takes a hit because no one wants to buy new trucks with untested engine models. Plus fuel prices go up making it more expensive to ship stuff. EPA regulations have a huge impact on the business that service over the road trucking.

      Don’t let the dip in transport prior to the dot com bubble throw you off when looking at history. There was an EPA change that kicked in right before the stock market crash. The big engine makers and OEM truck dealers were in a slump due to reasons other than a slow down in product being shipped.

    2. sanjay Says:
      January 4th, 2007 at 6:27 am

      I was reading a thread on trucking on the somethingawful.com forums and there was a guy who worked electronics and software at a big truck fabricator. He said they worked flat out in 2006 trying to get as many trucks out of the door due to new emission rules for 2007. 2007 is going to be a slump because all orders were already placed in 06. But 2010 is going to have even tougher regulations so truck orders will balloon again in 2009. Until then it may be lean season.

    3. Novice Says:
      January 20th, 2007 at 9:27 pm

      I regard this warning like a confirmed Hindenberg Omen, http://www.hussmanfunds.com/wmc/wmc070115.htm

    4. Frugal Says:
      January 21st, 2007 at 12:35 am

      Thanks for the pointer.

      I’m pretty sure that if you sell now, you probably won’t regret it in July.

      Market is very shaky and extremely overbought. Just don’t know whether there will be a final push to new high in S&P 500. Maybe not.

    «
    »